how to use analytics, metrics, and kpis to meet on …

R E S E A R C H B R I E F

IntroductionData-driven decisions that are rooted in relevant, trusted data, supply chain analytics are critical tools that companies across all industries are using to operate smarter, better, and faster. Driven by the proliferation of data—the world will be generating 463 exabytes of data daily by 20251, or roughly the equivalent of 213 billion DVDs—more companies are leveraging the key performance indicators (KPIs) and metrics that help them harness this ever-growing pool of data.

“Supply chains are a rich place to look for competitive advantage, partly because of their complexity, and partly because of the significant role they play in a company’s cost structure,” according to a recent Deloitte report2. “And with the power of new analytics, companies can now fine-tune their supply chains in ways that simply weren’t possible in the past.”

Good supply chain analytics help organizations utilize historical enterprise data to feed predictive models that support better decision-making; identify hidden inefficiencies and save money; and get a more holistic view of total organizational profitability. Expected to reach $7.1 billion in revenues by 2023 (up from $3.6 billion in 2018)3, the global supply chain analytics market is well positioned to help companies extract real value from the reams of data that are being produced daily.

In a world where customers are more demanding than ever, and where having the right product at the right place and at the right time is mandatory for any product-centric company, the need for good supply chain analytics, metrics, and KPIs is high. A company that promises that an order will ship one day and arrive at a customer’s location two days later had better be able to meet that timeline, or risk losing that business on the next order. A missed ship date equals a zero percent success rate on a KPI that all companies must be measuring: on-time ship rates.

To help shipping managers address their biggest supply chain challenges, Peerless Research Group (PRG) conducted a survey for Transplace on behalf of Logistics Management. We surveyed 125 top logistics and supply chain directors to learn more about their operations, their top challenges, and their insights for the future. The majority of respondents are manufacturers with domestic transportation networks, but that also operate globally. Survey participants were asked which areas of their supply chains need the most improvement; how those specific areas are measured; whether they’ve implemented on-time and in-full programs; what their most important KPIs are, and whether they’re being met. Here’s what these professionals had to say.

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HOW TO USE ANALYTICS, METRICS, AND KPIS TO MEET ON-TIME IN-FULL (OTIF) PERFORMANCE GOALS

Seeking better on-time delivery rates, visibility, and inventory management processes, more companies are leveraging analytics, metrics, and KPIs to streamline

their supply chains, cut costs, and enhance customer service levels.

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FIGURE 1

R E S E A R C HB R I E F

Using Analytics, Metrics and KPIs to Streamline the Global Supply Chain and Meet On-Time, In-Full Performance Goals

Highlighting Supply Chain Pain Points In today’s fast-paced fulfillment and shipping environment, supply chain managers need help across most areas of their operations. From hitting delivery timelines to reducing shipping errors to better inventory management, the room for improvement is expansive. According to respondents, meeting delivery timelines is the biggest pain point (46%), followed by reducing or completely eliminating shipping errors (43%), and inventory management (43%). They’re also focused on improving decision-making and planning; better supply chain visibility; and improved communication with their customers and carriers. (Figure 1)

Aspects or areas organizations would like to improve

46% Meeting delivery timelines

43% Eliminating/reducing shipping errors

43% Managing inventory levels

42% Improving decision-making and planning

42% Increasing visibility along the supply chain

41% Communication with customers and carriers

41% Streamlining procedures across our supply chain

36% Optimization of internal resources(labor, equipment, etc.)

34% Carrier KPIs and performance metrics

30% Reporting capabilities(manifests, maps, planning, load sheets, etc.)

26% Procurement process

21% Billing and invoicing/Auditing and payment

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FIGURE 2

There’s Room for ImprovementForecast accuracy is a problem for 45% of companies, followed by the ability to forecast customers’ purchasing needs (38%); quality and availability of data (28%); and the ability to share and exchange information with suppliers (26%). Conversely, 37% of respondents say they’ve mastered on-time delivery and 53% claim they are doing a decent job in this area. Sharing and exchanging information with customers is either excellent or good for 74% of companies, while 82% say that their systems can handle faster order fulfillment efficiency and processing time. (Figure 2)

Supply chain operational ratings in critical areas

53% 10%37%On-time delivery

52% 24%24%Ability to share and exchangeinformation with customers

58% 18%24%Order fulfillment efficiencyand processing time

54% 24%22%Visibility

56% 26%18%Ability to share and exchangeinformation with suppliers

58% 24%18%Controlling inventory levels

56% 28%16%Quality and availability of data

48% 38%14%Forecasting customers’purchasing needs

43% 45%12%Accuracy of forecasts

Excellent/Very good Good Fair/Poor

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FIGURE 3

Meeting promised delivery dates is an ongoing challenge for more companies right now, and the failure to do so can result in damaging outcomes. Among the top consequences for failing to meet delivery dates include lack of trust or fractured relationships with customers, according to 77% of survey respondents. The inability to meet delivery dates can further result in lost revenues (67%), the risk of losing customers (64%), cancelled orders (40%), and fines or chargebacks (36%). Even though missing delivery deadlines can be out of a carrier’s control, the outcome of such an event can be wide ranging. (Figure 3)

Consequences for failing to meet promised delivery dates

77% A lack of trust from customers/Fractured relationships with customers

67% Lost revenues

64% Run the risk of losing customers

40% Cancelled orders

36% Fines and chargebacks

Tracing Productivity and Using Key MetricsAs data usage proliferates, organizations are using it to track productivity, make oper-ational improvements, and enhance customer service levels. According to the survey, 97% of companies are confident in their ability to gauge critical tasks like the number of sales orders generated. They’re also tracking the number of invoices produced (93%); payments received (91%); and delivery data accuracy (86%). Conversely, the two areas where companies need the most help are with completing picking processes (according to 13% of respondents) and delivery date accuracy (14%). (Figure 4)

FIGURE 4

Rating operations’ ability to gauge critical tasks

Excellent/Very good Good Fair/Poor

57% 3%40%

57% 7%36%

52% 14%34%

57% 9%34%

54% 13%33%

Sales order generated

Invoice produced

Accurate delivery date

Payment received

Picking process completed

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According to the survey, 58% of respondents use metrics to track supply chain performance tasks. Of those that are using metrics, 65% are using them to track open orders, or those that haven’t been shipped or scheduled to ship yet. Other firms are using metrics to track quantity ordered versus quantity shipped (61%), order fill rates (58%), order cycle time (54%), vendor response time (39%), supplier changes to delivery deadlines (39%), and orders cancelled by suppliers (17%). (Figure 5)

FIGURE 5

Organizations running metrics on supply chain performance tasks

65% Open orders–orders that have not shippedor been scheduled to ship

61% Quantity order vs. quantity shipped

58% Order fill rate

54% Order cycle time–from order placement to delivery

39% Vendor response time(orders and order follow-up inquiries)

39% Supplier changes to delivery deadlines

17% Orders cancelled by suppliers

Runningmetrics

(net)

58%

Fulfilling Orders On-Time and In-Full According to the survey, more than one-third of companies are shipping on-time and in-full (OTIF) between 95%-99% of the time, while 28% are meeting this KPI on 90%-94% of their orders. Just 3% of companies are hitting this metric 100% of the time. (Figure 6)

FIGURE 6

Percentage of orders shipped on-time in-full

100% 3%

95%–99% 35%

90%–94% 28%

75%–89% 25%

50%–74% 8%

Less than 50% 1%

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Not all companies are using OTIF programs to measure supply chain performance. In fact, only 32% of the professionals surveyed are utilizing this type of program, while 68% are not. (Figure 7)

FIGURE 7

Companies participating in an on-time in-full (OTIF)program to measure supply chain performance

Yes 32%

No 68%

To attain a favorable OTIF score with their customers, 64% of companies are working to better understand the importance of this score—a possible indicator that more education could be needed on this metric. The survey found that 60% are working with a visibility provider to get better delivery time estimates.

Fifty-six percent of respondents are using a transportation management system (TMS) to optimize delivery, and 52% are trying to improve communication between their various departments. Finally, 8% of companies are ignoring OTIF and simply paying the fines associated with non-compliance. (Figure 8)

“We have not yet perceived the value in our business,” one professional pointed out. Another said, “OTIF has not been a determining factor in gauging performance levels. It is however becoming more important and as such we need to start reviewing it as a gauge factor in performance ratings.” Others say they’re putting OTIF on their organiza-tional agendas for 2020.

FIGURE 8

Actions taken to attain a good OTIF score

64%Working within the company to get

understanding regarding the importanceof OTIF and what can be done to improve scores

60%Working with a visibility providerto get better estimates on delivery

56%Working with a transportation management systemto optimize delivery

52%Working at communicating better between departments

8%We ignore OTIF performance and simply pay the fines

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FIGURE 9

Of those companies that do utilize an OTIF system, 40% rely on it regularly and use it on a daily basis; 36% gauge their OTIF metric once a week, and 12% use it once a month. (Figure 9)

Frequency organizations measure OTIF

Daily 40%

A few times a week 4%

Once a week 36%

A few times a month 4%

Once a month 12%

Less frequently thanevery three months 4%

FIGURE 10

Of those companies that are using OTIF programs, 58% say the program has prompted changes in their operations, while 42% say it hasn’t. (Figure 10)

Organizations saying their OTIF programhas prompted changes to their operation

Yes 58%

No 42%

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FIGURE 11

When asked what changes they’ve made because of their OTIF program results, survey respondents say they’re now paying more attention to inventory planning, stocking strategies, cross-functional agreements and setting values accordingly—all of which are important steps in today’s fast-paced distribution environment. Other companies are making multiple changes in supplier scheduling, production balancing across factories, shipping, transit need matching, delay in transit, delivery management, receiving, and inbound delivery processes. “We’re trying to get better planning in advance to improve shipping in full and having the right transportation assets in place,” another respondent reveals.

Measuring the BenefitsSupply chain professionals agree than an OTIF policy produces benefits with the most popular being improved metrics and KPIs (44%). Other benefits include being able to identify bottlenecks and improve customer service, lead times, overall efficiencies, and supply chain reliability. (Figure 11)

Benefits realized as a result of an OTIF policy(top mentions)

44% Improve metrics and KPIs

36% Identify bottlenecks in the process

36% Improve customer service

36% Improve lead times

36% Improve overall process efficiencies

36% Supply chain reliability

28% Improve on-time delivery

20% Becoming a more agile enterprise

20% Provide real-time visibility into supply chainand transportation operations

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FIGURE 12

The majority of respondents (54%) whose companies have implemented OTIF programs say their biggest challenge is detecting the root cause of their OTIF failures. Other roadblocks include the ability to manage large amounts of data (38%); understanding the OTIF and its impacts (38%); enforcing KPIs (33%); and encouraging corporate buy-in (4%). (Figure 12)

Challenges organizations have faced/are facingwith their OTIF program

54%Detecting root cause of OTIF failures

38%Ability to manage large amounts of data

38%Understanding what OTIF isand the impact it has on the organization

33%Enforcing KPIs

4%Corporate buy-in

13%Other

To work through these challenges, one respondent works to identify the root cause and then assigns it to a specific team member for resolution. “If it is a customer-owned cause, such as a customer freight routing issue, we request release from liability, but Walmart has a policy that prevents further discussion,” the manager explained. Another respondent said, “Most orders have wrong delivery dates from the beginning, and some customers delay payment.”

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FIGURE 14

For 68% of respondents, business partners are somewhat collaborative in OTIF issues, while 24% say their partners are highly involved, and 8% say they are not involved or collaborative at all. This lack of collaboration could indicate a larger problem that exists in the supplier-customer relationship. (Figure 14) “I see it as an adversarial process and definitely not collaborative,” one respondent pointed out.

Willingness/involvementof partner collaboration on OTIF issues

Highly collaborative 24%

Somewhat collaborative 68%

Not very/not at all collaborative 8%

FIGURE 13

For 23% of respondents, their OTIF program added costs to their business, with transportation, inventory, and labor being the top financial burdens associated with these programs. (Figure 13)

Organizations claiming OTIF programhas added cost to business

Yes 23%

No 77%

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UsingKPIs(net)

44%

Target(s) or key performance indicators (KPI)used to measure performance objectives

Reductions in transportation costs

Meeting customer service metrics

Cost savings

Improved workflow processes

Improved cycle times

Reduced warehousing costs

Improved labor management

Meeting sales forecasts

Documented process and performance efficiencies

Documented inventory reduction

Better supplier collaboration

Automation implementations

Reduced raw materials sourcing costs

Implementation of environmentally sustainable/green initiatives

63%

61%

54%

48%

46%

46%

44%

39%

35%

28%

24%

22%

17%

15%

KPIs and Measuring Performance Used to measure operational areas and determine efficiency and productivity, KPIs can help companies pinpoint and quickly address areas of concern within the supply chain. According to the survey, these measures are used by about 44% of companies. Of those managers who are using KPIs, those measures are focused on reducing transportation costs (63%), meeting customer service metrics (61%), saving money (54%), and improving workflow processes (48%). (Figure 15)

FIGURE 15

When asked how their organizations can improve their on-time and in-full delivery promises to customers, respondents pointed to better communication from client to purchasing through sales or client services; better data collection and analysis (which will lead to better direction for projects and process improvements); and improved tracking of late/lost orders with direct feedback to company distribution centers. “[We need a] system that gives full circle information on actual lead times,” another survey participant explained, “rather than the order entry personnel taking an educated guess at the lead times.”

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ConclusionsAs supply chains speed up, fulfillment windows shrink, and customer delivery expectations evolve, the need for good supply chain metrics, KPIs, and analytics will only expand. Many companies are already utilizing these measures to make good supply chain decisions and hit their on-time delivery performance goals, and even more will follow. With 56% of online consumers4 between the age of 18-34 years expecting same-day delivery, and 49% of shippers stating that same-day delivery makes consumers more likely to shop online, the push to meet 100% OTIF demands is on. If they’re not already doing so, companies will need to measure every aspect of the customer experience—the shipment and delivery of products included. Instead of simply “reacting” to problems when a customer calls about a late order, smart companies are putting systems and solutions in place to better measure and improve on-time performance across their supply chains. They’re also using the right KPIs to measure their goals, hold their partners accountable, and meet their customers’ high expectations.

MethodologyThis research was conducted by Peerless Research Group on behalf of Logistics Management for Transplace. This study was executed in November of 2019 and was administered over the Internet among subscribers to Logistics Management magazine. Respondents were prequalified for being involved in managing, evaluating, or purchasing supply chain management solutions and strategies for their organization.

The findings are based on information collected from 125 top logistics and supply chain directors. Respondents work predominantly in logistics, distribution, and transportation management (28%); corporate/division management (25%); supply chain management (9%); and operations management (8%).

A range of industries and company sizes are represented in this study. Manufacturers (42%) distribution (17%), wholesalers (14%), and retail/consumer product goods (8%) span the vertical segments surveyed. There was a good representation across all reve-nue ranges, with 26% of the companies reporting $1 billion or more in annual revenues.

1 https://www.weforum.org/agenda/2019/04/how-much-data-is-generated-each-day-cf4bddf29f/2 https://www2.deloitte.com/content/dam/Deloitte/ie/Documents/Analytics/Supply_Chain_ Analytics_3min_guide_Deloitte_Ireland_Analytics.pdf3 https://www.marketsandmarkets.com/PressReleases/supply-chain-analytic.asp4 https://www.invespcro.com/blog/same-day-delivery/

About TransplaceTransplace partners with global shippers to run their logistics business more intelligently through its advanced logistics technology platform, proprietary transportation management software, data insights, expert engineering, and execution services. As a result, Transplace has become the premier provider of logistics technology and services. The Company also excels at strategic over-the-road capacity services, with intermodal and truck brokerage capability, and border management services, including cross-border customs and logistics services. With over 1,000 customers and $9 billion of Freight Under Management (FUM) in North America alone, and a growing client base in Europe, Transplace continues to deliver the intelligent solutions that grow and differentiate its customers’ businesses through more intelligent and efficient supply chains.

Contact Information:Karen SageCMO, [email protected]

https://www.weforum.org/agenda/2019/04/how-much-data-is-generated-each-day-cf4bddf29f/

https://www2.deloitte.com/content/dam/Deloitte/ie/Documents/Analytics/Supply_Chain_%20%20%20%20Analytics_3min_guide_Deloitte_Ireland_Analytics.pdf

https://www2.deloitte.com/content/dam/Deloitte/ie/Documents/Analytics/Supply_Chain_%20%20%20%20Analytics_3min_guide_Deloitte_Ireland_Analytics.pdf

https://www.marketsandmarkets.com/PressReleases/supply-chain-analytic.asp

https://www.invespcro.com/blog/same-day-delivery/